From fast food to fine dining, restaurants play a vital societal role. But it’s not all sunshine and rainbows as they’re notoriously hard to run thanks to perishable ingredients, labor shortages, or volatile consumer spending. Unfortunately, these factors have spelled trouble for the industry as it has shed 8.6% over the past six months. This performance is a far cry from the S&P 500’s 15.6% ascent.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. On that note, here is one resilient restaurant stock pinned to our Google Maps and two we’re swiping left on.
Two Restaurant Stocks to Sell:
Wendy's (WEN)
Market Cap: $1.78 billion
Founded by Dave Thomas in 1969, Wendy’s (NASDAQ: WEN) is a renowned fast-food chain known for its fresh, never-frozen beef burgers, flavorful menu options, and commitment to quality.
Why Are We Hesitant About WEN?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
- Forecasted revenue decline of 2% for the upcoming 12 months implies demand will fall off a cliff
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Wendy's is trading at $9.37 per share, or 9.5x forward P/E. To fully understand why you should be careful with WEN, check out our full research report (it’s free).
Cracker Barrel (CBRL)
Market Cap: $968.6 million
Known for its country-themed food and merchandise, Cracker Barrel (NASDAQ: CBRL) is a beloved American restaurant and retail chain that celebrates the warmth and charm of Southern hospitality.
Why Do We Think CBRL Will Underperform?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Estimated sales decline of 2.4% for the next 12 months implies a challenging demand environment
- Operating margin of 1.4% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
Cracker Barrel’s stock price of $43.37 implies a valuation ratio of 12.7x forward P/E. Check out our free in-depth research report to learn more about why CBRL doesn’t pass our bar.
One Restaurant Stock to Watch:
Brinker International (EAT)
Market Cap: $6.07 billion
Founded by Norman Brinker in Dallas, Brinker International (NYSE: EAT) is a casual restaurant chain that operates the Chili’s, Maggiano’s Little Italy, and It’s Just Wings banners.
Why Could EAT Be a Winner?
- Same-store sales growth over the past two years shows it’s successfully drawing diners into its restaurants
- Operating margin expanded by 4.3 percentage points over the last year as it scaled and became more efficient
- Free cash flow margin increased by 2.6 percentage points over the last year, giving the company more capital to invest or return to shareholders
At $135.00 per share, Brinker International trades at 13.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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